Most software renewals are treated as simple calendar events by IT leaders, not recognizing that business units currently control 81% of all subscription spending. The industry advice of "centralizing your inventory" is no longer accurate due to the discrepancies between user data and complex mid-term contract limits.
This guide breaks down vendor promises of easy savings to reveal the actual limit of discovery, identify potential security concerns, and detail the operational functions that differentiate a successful SaaS license management tool from an ineffective reporting tool.
How SaaS License Management Works
On average, mid-market companies lose $420,000 per year due to unused software. For the entire marketplace, 30-50% of software licenses are sitting idle. Vendors often promote their platforms as being able to automatically save their customers 30%, but most do not provide any of the analytical data necessary to achieve those savings.
Actual software management includes much more than counting the number of licenses. Effective SaaS license management requires that the licensee know how many licenses are being used in relation to the terms of the contract.
Knowing that a user hasn't logged into an account in three months does not provide you with any useful information when you need to decrease the number of seats prior to the expiration of your annual contract. Keeping a record of the number of contracts you committed to versus the number of seats that you actually consumed is critical.
The primary challenge in software management is discovery. If you cannot discover what is being spent, you cannot maximize your savings. Most business units spend the majority of their software budget without going through IT.
If your SaaS license management system is based only on spreadsheets, your information will be obsolete as soon as you save the spreadsheet. You need to implement ongoing methods of discovery, integrating with your identity provider, finance system, and individual application integrations.
By integrating precise determination with the timely reminder of renewals (within 90, 60 and 30 days), a system that truly manages costs is created. The platform has seen a transition from simply being a tracking tool to one that is now capable of executing automatically.
Evaluating the Best SaaS License Management Tools
You should not have to rely on a platform that simply provides a "directory" of the software you have purchased but rather one that is tailored to the exact needs of your business.
The following platforms were evaluated based on how well they can help enterprises address and manage the various technology challenges they are faced with, how well they can deal with identity issues, and how well they can maintain contractual obligations.
1. Zylo
Zylo provides the leading enterprise discovery solution in the industry because of its approach to this issue, which takes a finance-oriented approach first. By using expense feeds from employees and accounts payable, it captures the vast number of software products purchased by employees outside of the normal IT channel.
Zylo excels at determining a customer's noncompliance with the software they are authorized to use. Zylo matches the customer's gross spending data with a very large internal database of products to categorize the software and identify any duplicate subscriptions.
After identifying the software, Zylo assists the customer in establishing a renewal schedule within 90 days of the software's expiration, and also performs benchmarking, which enables the customer to compare their exact cost per seat with the cost per seat paid by others in the same industry, thus giving them some negotiating leverage during contract negotiations.
2. Torii
Its main advantage is speed, as Torii enables IT departments to respond quickly when new software is introduced due to employee self-service. Torii enables IT departments to implement automated rules for the workflow of the joiner/mover/leaver process and enable IT departments to create and implement these types of automated rules.
Torii makes it easy for companies to recover software licenses from multiple connected applications when an employee leaves the company. Through automated license recovery with direct write access, this process eliminates the need for processing numerous tickets manually over the course of days.
However, due to security risks, companies must go through an internal review prior to allowing third-party tools to modify employee accounts.
3. Zluri
Additionally, companies that have to comply with a significant number of compliance audits, such as SOC 2 and SOX or ISO 27001, are targeted by Zluri. Although Zluri does offer basic seat tracking, the primary goal is to provide control over access and identity governance.
While companies that are subject to periodic audits (e.g., quarterly or semi-annually) must be able to prove to auditors that only authorized users have access to certain systems, Zluri provides companies with an easy way to do so by automating the access review process.
Each quarter, managers are required to verify who has access to all applications that are considered to be high-risk. In this manner, Zluri bridges the gap between optimizing costs and ensuring compliance with security requirements.
For example, Zluri identifies inactive users, allowing companies to reduce costs. Additionally, Zluri provides a record of the removal process for all former users to meet the requirements of external audits.
4. BetterCloud
BetterCloud's platform is designed more for automation than it is for tracking users. Through direct integrations with providers of major platforms (Google Workspace, Microsoft Entra ID, etc.), BetterCloud provides IT operations teams with the ability to handle an overwhelming volume of onboarding and offboarding requests.
This platform also provides chains of complex actions that can occur based on specific events (e.g., if an employee changes departments, they will automatically be downgraded to a lower licensing level).
However, creating chains of actions during set-up requires thorough analysis of potential security risks, as well as exceptions. In addition, if a company wishes to maintain a license for an employee who is on medical or parental leave, it must have appropriate exception handling in place, so that the platform does not automatically delete important data.
5. CloudEagle
CloudEagle’s primary focus is to manage the software you procure and to provide insights into finances based on that procurement. It is an extension of the purchasing team.
This tool makes it easy to have all the information needed to negotiate contract renewals, including contract documents, true up dates, and pricing tiers, in one place. CloudEagle shines when preparing for a challenging renewal.
CloudEagle shows you specific SKU pricing benchmarks to illustrate where you are being overcharged based on current market rates. It also shows you where you are at in terms of actual usage and how much you have committed to, which provides you with the exact numbers your finance department needs to reject a forced price increase.
6. Flexera One
Enterprise customers typically work within hybrid environments and do not work with purely cloud-based tools. Flexera One is designed for large enterprise organizations that must strike a balance between modern web subscription based tools, such as subscription and cloud software, with legacy on-premise agreements from Oracle, SAP, and Microsoft.
Flexera helps track your organization’s "effective license position" across your entire organization, meaning it provides a detailed picture of your organizations' license position based on the various complexities within the organization.
It also takes into account the complexity of license entitlement and compliance. If you work for a large company with a hybrid working environment, a simple "seat counter" approach will not work. Rather, Flexera can help to defend your organization against audits based on the complexity of the license agreement.
7. Productiv
Productiv is a tool to measure the value of the software by monitoring user engagement through information gathered from the user’s actions when using the software. For example, Productiv does not simply capture that an employee has logged in to their account but rather it tracks exactly what features they are using.
The data that Productiv captures allows your organization to control costs associated with software licensing much more effectively than a simple cost-cutting approach.
If your organization is going to invest in a premium license type, but most employees are using the basic features, Productiv will alert your organization that there is a mismatch between what is being paid and what is being used, and will assist in creating a strategy to reduce costs through a change in license level.
Additionally, Productiv allows you to correlate your use of applications back to your organization’s actual goals for employee productivity. By doing so, Productiv shifts the conversation from simple cost cutting to showing the actual return on investment of software usage.
Finding the Right Data Sources
A single approach will not yield the complete picture of your entire network. Vendors conceal their true areas of weakness, therefore, it becomes essential to combine multiple sources of knowledge together in order to get the full and accurate view.
If you attempt to put all your eggs in one basket, you are likely to lose everything. You need to define the boundaries of what you are looking for and evaluate your findings.
Identity provider linkages are useful for monitoring the use of approved applications, however, they do not capture the use of any other software purchased using an individual's own credit card.
Finance data will give you the total dollar amount spent by all of the business units but will not tell you how many employees have accessed the application, how many seats were active, or how many features were used.
Reports linking applications are a good source for the deepest and most accurate utilization metrics of the application but do not scale well and must be maintained on a weekly basis if managing dozens of niche applications.
Using web browsers will allow you to capture every request made via the web to expose unapproved applications but will encounter many obstacles in terms of internal security, legal, and privacy concerns.
The New Pricing Models
Tracking and reporting models that are standard do not work when vendors change the way they charge customers. Today, many software vendors are moving away from the flat monthly per user fee to a consumption-based pricing model, especially in terms of artificial intelligence.
Over 75 percent of IT professionals experienced unexpected charges associated with the use of AI and consumption limitations this past year. Every time you query an AI tool or process a large dataset, you create a cost. Traditional seat counts will not be able to identify these costs.
Your token, credit, and processing hour tracking management platform must now include enhanced reporting of all department utilization activity. You will require anomaly detection capabilities that alert the finance team as soon as a department has a large increase in its daily usage.
Otherwise, your budget will already be exhausted by the time the monthly invoice comes in. IT will also have to impose strict utilization limits on all departments, as well as to assign individual cost ownership of the software licenses to the department leaders who approve the software use.
Final Thoughts on Software Optimization
Lost software utilization is a result of structural failures, not a failure of effort. Identifying that you have lost money will not help you fix operational problems by purchasing visualization tools; there are currently many expensive data visualization tools on the market that will only tell you how much money you are losing and not provide any solution on how to prevent it.
To truly have control of your software environment, an execution loop must be created around the use of your software. The loop needs to have a clearly defined threshold (for example, to remove any license showing less than 50 percent utilization for more than 90 days) and include a workflow to check for exceptions legally, reclaim the license, and send it back to a central pool.
New licenses should not be purchased until the central pool is empty; only teams that can take in raw usage data and act on it in an automated way will achieve success.
Common Questions About Controlling Your Software Portfolio
How do companies with only read-only platforms miss out on the automated reclamation of software?
Companies using read-only platforms have to pull the data from each application and generate reports, meaning your internal IT team has to log into each individual application and remove the users manually.
This creates a long backlog of open tickets that leads to many resources being tied up while waiting for users to be off-boarded. If you do not have the ability to change user accounts via direct write access, you cannot achieve your automated off-boarding of the software.
What operational checkpoints exist to prevent false positives during bulk software access removal?
In some instances, automated systems can mistakenly remove the accounts of employees who are out on parental leave, medical leave, and/or long-term sabbaticals.
In order to protect yourself from this, you need to establish strict exception lists tied directly to your human resources system. You also need to create an inactivity window of 90 to 180 days, allowing you to avoid having to rescind the licenses of employees who simply missed a few meetings.
How does AI consumption pricing impact the traditional method of negotiating seat-based contracts with vendors?
Unlike the process of negotiating a set price for each seat based on an employee's use (for example, you can't negotiate a set price for 500 users), you have to determine the variable token usage and processing credits in advance.
Software vendors have historically layered these costs on to subscription pricing. It would be best to have definite cost caps, as well as monitoring your daily usage, and negotiating for lower overage penalties to prevent unexpected spikes in invoices in mid-term contracts.
Why did the standard SSO integration process not capture all of the total shadow IT?
The SSO integration process only records and tracks the applications that IT has allowed and connected to its identity network.
If an employee, for example, buys a new design tool using their corporate credit card and logs in using a password sent via email, that connection goes undetected by the SSO application. Therefore, you must monitor your finance and expense reports regularly to determine if there has been any unauthorised shadow IT spend.
